-
Bank of America raised its forecast for China’s GDP growth rate of 5.0% in 2024 after a strong first quarter.
-
BofA said China’s exit from the economic downturn could also mean a reduction in government support going forward.
-
The real estate crisis and weak demand remain issues, and BofA does not expect a “full-fledged growth recovery.”
Bank of America has raised its forecast for China’s economic growth in 2024 after the world’s second-largest economy reported surprisingly strong first-quarter results.
The bank raised its full-year GDP growth forecast to 5.0% from 4.8% and also raised its 2025 forecast to 4.7% from 4.6%. BofA analysts led by Helen Chao said Friday that China recorded 5.3% growth in the first quarter, on the back of the province’s infrastructure and manufacturing investments, bringing it within the Chinese government’s 5% GDP target. The company stated that this upward revision was made in response to the fact that the
On the investment side, BofA said that the FAI index, a key indicator of capital investment in fixed assets, shows that the strong investment seen in the first two months of 2024 is not just a “brain fake”. He said it was confirmed.
Year-to-date, FAI growth was 4.5% year-to-date, with manufacturing increasing by 9.9% and infrastructure increasing by 8.8%, despite a 9.5% decline in real estate investment.
“This is particularly meaningful as investment typically leads the business cycle in China, as this is the sector that is likely to benefit first from policy support,” the analysts said.
Still, BofA does not expect a “full-fledged growth recovery” as China is still in the midst of a real estate crisis and grappling with consumer demand issues.
“It is important to note that other activity data, including retail sales and industrial production, still point to weak domestic demand,” analysts said, adding that industrial production and retail sales data for March were lower than expected. It added that it was below.
“Bottom-up channel checks and indicators, such as cement production and shipments, also appear to be in contrast to strong top-down infrastructure growth.”
With a solid first-quarter data set in hand, policymakers may be less inclined to tighten easing measures, dashing hopes for imminent policy support, the bank said. Analysts wrote that a modest growth slowdown is expected through the remainder of 2024 as policy support weakens.
BofA said that in addition to a possible decline in government support, a deteriorating real estate sector that undermines buyer confidence and a significant decline in China’s exports amid geopolitical tensions pose downside risks to China’s growth outlook. He said he was adding.
Read the original article on Business Insider